With today's good jobs #, we are going to hear a lot of political posturing from both sides, but mostly the President, so my comment today focuses on market performance of Presidents in their 3rd Year of the 1st Term. The first chart below from Global Macro Monitor illustrates that since WW II, every President has had the S&P 500 rise in their 3rd Year of their 1st term. This throws more fuel into my thesis that the market is going to rally into the year-end, and Obama will end up having the S&P 500 in the black by the end of this year.
Another proof point that investors have pointed to concerning a December rally, is that the S&P 500 appears to be tracking the 1971 analog, also the third year of a first term President. Ironically, 1971 was also a year of similar currency turmoil as President Nixon officially ended the gold standard and the Breton Woods international monetary system in the middle of August. During a massive run on gold, then Treasury Secretary John Connally and Under Secretary for Monetary Affairs Paul Volcker advised the President to let the dollar float, effectively making it a fiat currency. This caused panic in the global markets until other countries let their currencies go.
History is rhyming here with our own Euro crisis and sovereign debt crisis. Let’s hope we get a similar spike up as we did in 1971 and 1991 and Santa brings us a nice rally to end the year.
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